Friday, 11 April 2014

Sales & Marketing

I overheard a conversation the other day. I know it’s rude to listen in on other people’s conversations but some people talk so loud its like they want to be overheard. Anyway, one fellow was holding forth over the way a certain product was being marketed. He advocated certain solutions to address these concerns, involving, among other things, a brick wall, a party of uniformed gentlemen sporting rifles, and a group of unhappy former Marketing executives.

It is sad that the term “Marketing” engenders a rather negative response these days, and I thought it was worth a comment or two to address the topic. The problem we are seeing is that the term “Marketing” is not really being applied correctly. And the reason for that is the way many large companies - particularly those which serve consumer markets - organize their sales and marketing efforts.

I suppose very few people who have not worked in these areas of business have ever bothered to stop and consider the differences between Sales and Marketing. In most peoples minds the two are conflated into one single entity, “Sales-and-Marketing”. So what exactly is Marketing if it is not the same thing as Sales?

The easiest definition is that Marketing is the activity that stops once the product is designed and put into manufacture. Sales is the activity that starts at that point and seeks to put the product into customers’ hands. To illustrate that distinction, I want to invent an imaginary product and discuss the task facing Umberto, an equally imaginary VP of Marketing. For relevance, my hypothetical product will be an audio product. (And for my sins, I did serve time in the trenches as a Product Marketing Manager, although not in any consumer-oriented field.)

Umberto first heard of the Globular Diaphragm in a meeting with his VP of R&D. The product of fruitless research in an unrelated field, it turned out that a Globular Diaphragm could be used to make a loudspeaker with some remarkable properties. For a start, the loudspeaker would be incredibly efficient - close, in fact, to the maximum theoretical efficiency. In addition, it would exhibit an unusually large auditivity coefficient, and a remarkably low dispersive deflation, qualities which, if I hadn’t made them up, would permit the design of a remarkably good, and unusually small, loudspeaker.

As VP of Marketing, Umberto’s job was to figure out which markets would be best served by this new technology. Small and efficient are two words which immediately crystallized two more words in his mind: Smart and Phone. With Globular Diaphragm technology at his disposal he could own the Smart Phone market! Unfortunately, reviewing this possibility with his VP of Engineering he found that, because the technology relied on a material known as Barely Obtainium (a commercially produced version of Unobtainium), it was extremely expensive. In fact, it would make the loudspeaker so expensive that no Smart Phone manufacturer would be willing to consider it. So that option was discarded.

Umberto next considered the Military market. In general, when something new comes along which offers a great technological advance, but is too expensive to be used in a mainstream consumer product, the natural thing to do is to sell it to the Army. Umberto envisaged a product that could be deployed behind enemy lines. It would be so light it would blow about in the wind, all the while emitting (rather loudly, due to its dispersive deflation) that god-awful tune “I know a song that get’s on everybody’s nerves!”. Such a device could cause massive disruption in enemy morale. As it happened, Umberto met with his local Senator - a powerful member of the Standing Committee on Military Spending. The Senator was wildly enthusiastic, and was sure the Joint Chiefs would all want to be on board. He outlined the road map to making the program work. If all went well, the product could go into service in as little as ten years time! Eventually, Umberto discarded that option.

Next, Umberto decided to investigate the high-end audio market. He soon found, much to his astonishment, that not only was there a market for $1,000 loudspeakers, there was also a market for $10,000 loudspeakers. Even $100,000 loudspeakers. This market was tailor-made for Globular Diaphragm technology. He commissioned a prototype from his VP of Engineering - a cost-no-object design that would blow away every other loudspeaker ever produced. The prototype was about the size and shape of an electric kettle, but sounded for all the world like a pair of Wilson Alexandria XLFs. The incredible quantity of high-quality Barely Obtainium used in that design would mean that such a product, if he ever committed it to manufacture, would have to sell for north of $100,000. But every dealer he met told him the same story. Yes, it was better than the Big Wilsons. And yes, the small size meant that it was much easier to deploy in a real-world installation. But anyone who was willing to blow that kind of cash on a pair of speakers wanted it to look like the Big Wilsons, and not like a pair of kettles. And it needed to weigh 2 tons, not 2 kg.

When he got home, Umberto sat down, somewhat deflated, and poured himself a nice glass of Brunello. Needing to relax, he turned on his Bose Wave radio. Having listened to nothing but incredible audio on his lengthy road trip, it suddenly dawned on him just how god-awful his Bose Wave radio actually sounded. He wondered how good it might sound if he ripped out the tinny speakers and popped in a pair of the smallest and cheapest Globular Diaphragms. Within a week he had a prototype. He knew the chief buyer at Best Buy, where he bought his Bose Wave Radio, and made an appointment to demo his prototype. Unfortunately, the prototype looked pretty strange, due to the fact that it had been cobbled together from the bits and pieces that were lying around. It looked like the love-child of a Retro table-top radio and a futuristic Plasma TV. But it sounded quite amazing. And the Best Buy buyer absolutely loved the bizarre new look.

This turned out to be a killer idea. His Best Buy buddy indicated his strong interest in carrying such a product. Umberto arranged meetings with all the major distribution outlets. They all thought it was a killer product. They all wanted a copy of the prototype to take home - and they all got one. They all reported back that their wives (they were all men, of course) all thought it looked really cool. They all wanted another one for their country cottages - and they all got one. And they all agreed it was the most desirable new lifestyle product they had come across in a long time. They all wanted to carry it.

Umberto’s job was now done, and, per company policy, ownership of the product was handed off to the VP of Sales, Greasy Pete. Greasy Pete’s team opened preliminary sales talks with all of the enthusiastic retailers. Negotiations were tough. While the product looked and sounded amazing, it was still way too expensive. Only Apple can get away with asking that kind of money. Wasn’t there some way of getting the price down?

Greasy Pete met again with Umberto and the VP of Engineering to brainstorm ways of trimming costs. It turned out, of course, that the Globular Diaphragm was pushing the cost through the roof. Greasy Pete suggested they replace the Globular Diaphragm with a cheap parts-bin loudspeaker cone. That way they could realize a massive cost savings. He could push it at retail for one-third of the price originally envisaged, and actually make double the projected revenue. The retailers would love it even more. After all, he assured Umberto, customers won’t care what it sounds like. It would still look way cooler than anything else in the store.

Greasy Pete immediately christened the new product “21st Century Soundscape” and launched it with a slick advertising campaign, which was based on the notion that a newly-married couple’s first priority would be to purchase a new “21st Century Soundscape” portable audio system, whose pounding room-filling beat could be carried up to the bedroom eliciting spectacular, although unspecified, benefits. Sales turned out to be equally spectacular, and the product was a roaring success. As to the Globular Diaphragm technology? It was set aside and forgotten about.

Several months later, two audiophiles passed a shop window with a big display of 21st Century Soundscape products. “So, do you enjoy a 21st Century Performance in your bedroom?”, asked the first, quoting the product’s now ubiquitous catch phrase. “Have you actually heard the thing?”, replied the other, “It sounds awful.”“I know,” said the first, “It’s nothing but marketing hype. Those guys wouldn’t know great sound if it chased them down the street.”

That’s my little story. It is not a morality play. In the end Greasy Pete made what looks like the right call, but who knows? In most modern companies Greasy Pete holds the title VP Sales & Marketing, and he is a senior executive with a lot of clout. Umberto holds the title Product Marketing Manager, and wields a much smaller club. What Greasy Pete wants, Greasy Pete usually gets. A very wise man, the Chairman of the Board of one of my companies, had ten rules of business. One of those was “Never Let The Salesman Set The Price”. That was - and remains - a fine piece of advice. It describes a path that can be a very hard one to follow, and can lead to disaster if you should give in to temptation and stray.